LSE casts doubts on timing of £480m LCH

MARTIN FLANAGAN

THE London Stock Exchange may fail to complete its €600 million (£480m) takeover of LCH.Clearnet by the end of this year, its chief executive gave warning yesterday.

Xavier Rolet,, the LSE’s chief executive, who was unveiling flat interim profits of £217.2 million, had previously said he expected the deal for the European clearing house to go through by end-2012.

“We are in conversations with LCH and the authorities and we’ll have to see what they decided,” Rolet said. “I can’t speculate on the outcome or the timeline.”

Analysts say the equities-focused London exchange wants LCH to allow it to reposition itself to move more aggressively into the market in derivatives – contracts tied to the underlying value of shares, currencies, commodities and indexes.

Clearing houses sit between financial trading firms, insuring them against losses in the event of a counterparty default.

They are seen as having become more important since the collapse of Lehman Brothers four years ago, which precipitated the banking industry crash.

The LCH deal was agreed by shareholders of both sides last spring, leaving it only needing regulatory approval. But the terms of the acquisition were called into question by analysts in September when the European Commission proposed rules for clearing houses that would, if passed, leave LCH needing to boost is regulatory capital by over €300m.

The LSE said in a statement yesterday: “The group is in discussions with LCH.Clearnet regarding… the measures LCH.Clearnet is exploring to ensure it can continue to deliver an acceptable return on its capital.”

The exchange revealed its capital markets revenues in the six months to end-September fell 19 per cent to £129.7m.